Samsung branches out as smartphones reach saturation

Samsung has reached a turning point with its handsets and wearable technology and will shift its focus to how people interact with their handsets to gain an edge in a mature smartphone, the company's European marketing director told CNBC.

"It's very important for Samsung to respect the fact that this is a new era in the smartphone industry," Rory O'Neill told CNBC Tuesday.

"It's not really driven by specs; it's not really driven by features. We really believe the future of the smartphone sector is going to be driven by what people do with their phones."

Samsung used the Barcelona Opera House's chamber orchestra Monday night to help launch its latest smartphone, the S5, as well as revealing a new range of wearable technology. The launches come at a time when smartphone sales have begun to fall back and hit Samsung's earnings.

The Galaxy S5, which will be available in April, has a slightly bigger screen than its predecessor, at 5.1 inches compared with 5 inches, and improved camera technology, Samsung said. It will roll out the S5 globally on April 11, with pricing details yet to be disclosed.

However, Nick Dillon, senior analyst at Ovum, argued that most consumers would find it difficult to notice the differences from the previous model, although that was not surprising, "given the maturity of the smartphone market and the pressure on the Samsung not to mess with its winning formula.

"Samsung reminded us quite how successful this formula has been, noting that it has sold 200 million Galaxy S devices since launching the franchise in 2010," Dillon said in a note.

"I think fundamentally we've reached a new level in the smartphone industry, this is now mature technology," he told CNBC Tuesday at the Mobile World Congress in Barcelona

To broaden Samsung's portfolio of products in the maturing market, the S5 was launched alongside the Gear 2 and Gear 2 Neo smartwatches, as well as the Samsung Gear Fit, which targets the fitness sector. The Gear Fit has a curved touch-sensitive screen and its features include a pedometer.

O'Neill said that mobile users were only now beginning to learn about what they want their smartphones to do and that the future relied on developers responding to the integration of various devices in each consumers' lives. "It's about addressing the fundamental use cases of smartphones and not throwing technology and specifications at them (the consumer) that they either don't understand or don't want to use," he said.

Samsung still has a strong hold on the smartphone market, shipping nearly 320 million phones in 2013, the largest ever in one year by a single vendor, according to market researcher Strategy Analytics.

The South Korean company captured 32.3 percent of the global smartphone market last year, more than twice the 15.5 percent market share held by second-placed Apple.

Despite this, the saturation of western markets will be a cause for concern as replacement overtakes entry, with the market giving way to brand fatigue and new opportunities for other handsets.

In such an environment, Samsung has embraced its need to move beyond the smartphone, hence its first launch of the smartwatch last year.

Samsung's smartwatch received widespread criticism in the press for being a step too soon, yet O'Neill argued that the company had to remain at the forefront of an emerging technology - unlike the smartphone market, which now did not need such drastic changes.

"Wearables and accessories are emerging consumer technologies and I think when you're operating in emerging technology, you have to innovate really quickly, you have to do and try a few number of things, and you have to listen to consumers and be able to act really quickly," he said.

"If there's anything Samsung has proven that it's good at to the world it's moving very quickly and being innovation focused."

It will remain to be seen how well either the S5, Gear smartwatches or Gear Fit do when they come to market, but it is clear that Samsung has recognized the saturation of the smartphone well and emphasized the push into the wider realm of a wearable technology and a multi-screen environment that households are moving towards.

"We want them to have a phone, watch, gear, tablet, and a TV and washing machine. We are a consumer technology company and we think that technology can have an incredible impact on people's lives otherwise we wouldn't be there," O'Neill said.

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